Determinants of the (un)employment intensity of growth: Evidence from a cross section of EU regions
نویسندگان
چکیده
The responsiveness of labor demand and unemployment to growth is an issue of ongoing political and academic interest. Economic growth is supposed to be the key to increase labor demand and reduce unemployment. Departing from Okun’s and Verdoorn’s law, most research on the (un)employment intensity of growth has focused on national disparities and the role of labor market institutions. Empirical evidence on the regional level is scarce. We investigate differences in regional labor market responsiveness and their potential determinants for a cross section of European regions. The data set covers the NUTS 2 regions in the EU15 for the period 1980 to 2002. Following a spatial modeling approach estimation of the (un)employment intensity of growth takes interaction among neighboring labor markets into account. The findings point to substantial differences in labor market effects of output growth among European regions. Labor market institutions explain a significant part of these disparities. However, apart from such national factors there are important regional determinants. The sectoral specialization of the regional economy plays a prominent role, and the responsiveness of employment to growth in urban and rural regions also differs significantly.
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